This paper investigates the determinants of business cycle synchronization across regions, using both international and intranational data to evaluate the linkages between trade in goods, trade in financial assets, specialization, and business cycle synchronization. The results show that simultaneity is important, as both trade and financial openness have direct and indirect effects on cycle synchronization. Regions with strong financial links are more synchronized but also more specialized. Specialization patterns have a significant effect on business cycles beyond their reflection of intra-industry trade and openness to goods and assets trade. The role of trade is consistent with existing models once intra-industry trade is controlled for. The paper introduces a simultaneous equations methodology to assess the magnitudes of these channels. The results suggest that financial integration may decrease or increase synchronization, but will unambiguously induce specialization. The paper also finds that specialization has a direct effect on business cycles synchronization, even after controlling for trade and financial integration. The results are consistent across international and intranational data, suggesting that theories of international business cycles should incorporate sectoral heterogeneity, trade within and between industries, and herding in international capital flows. The paper concludes that the simultaneous estimation method is crucial for understanding the complex interactions between trade, finance, and specialization in business cycle synchronization.This paper investigates the determinants of business cycle synchronization across regions, using both international and intranational data to evaluate the linkages between trade in goods, trade in financial assets, specialization, and business cycle synchronization. The results show that simultaneity is important, as both trade and financial openness have direct and indirect effects on cycle synchronization. Regions with strong financial links are more synchronized but also more specialized. Specialization patterns have a significant effect on business cycles beyond their reflection of intra-industry trade and openness to goods and assets trade. The role of trade is consistent with existing models once intra-industry trade is controlled for. The paper introduces a simultaneous equations methodology to assess the magnitudes of these channels. The results suggest that financial integration may decrease or increase synchronization, but will unambiguously induce specialization. The paper also finds that specialization has a direct effect on business cycles synchronization, even after controlling for trade and financial integration. The results are consistent across international and intranational data, suggesting that theories of international business cycles should incorporate sectoral heterogeneity, trade within and between industries, and herding in international capital flows. The paper concludes that the simultaneous estimation method is crucial for understanding the complex interactions between trade, finance, and specialization in business cycle synchronization.